Projects and the Project Portfolio Management Process: application in a Consulting Company

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Master’s Degree programme –

Second Cycle

in International Management

“(D.M. 270/2004)”

Final Thesis

Projects and the Project Portfolio

Management Process: application in

a Consulting Company

Supervisor

Ch. Prof. Marco Tolotti

Graduand

Lorenzo Fabris

Matriculation Number 850245

Academic Year

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Introduction

Project Management is today a discipline that has developed and been adopted into almost all the business sectors, especially into the industrialized countries where, with respect to the past, in the dynamic and fast-changing market in which companies operate today, the ability of dealing effectively with Projects appears to be more important than ever.

In the first part of this work, the main characteristics distinguishing projects from other operative activities are analyzed, taking into consideration the development of the Project Management Discipline within the modern firms. Three of the most widely known methods used to represent and schedule projects are then, presented, namely the Gantt Chart, the Critical Path Method and the Pert Analysis.

Project Management is usually intended as the set of principles and techniques that help a project or a program to be delivered on time and on budget. It mostly refers to the actions taken during the project execution itself, in order to speed up activities and to optimize the resources available.

In fact this work tries to expand this limited point of view about Project Management, taking into consideration also its important role in the first steps of any planned activity and analyzing the differences between delivery and presales projects.

In the second part of the thesis, we discuss how these techniques are applied in the realm of a project-driven company. We will analyze the case study of Qintesi, a small consulting company located in Milan and Marcon (Venice).

In particular we will focus on the role of Project Management in this firm, and the principal tools supporting this activity are, then, presented. The most challenging issue that this company has to deal with, however, is often represented by the Management of the so called “Project Portfolio”, where the organizational strategy has to face resources limitations, and in which the scheduling cannot ignore staffing distribution among hundreds of projects.

This work tries to analyze the complex framework that supports a company in dealing with the management of a Project Portfolio. The discussion will, then, go through the main phases of this process, presenting some instruments and methods

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that are commonly used in this management area, with reference to the practices that are adopted by Qintesi.

The importance of the discipline of Project Management emerges more than ever in the management of a consulting company like Qintesi, where projects constitute the driver of its daily activity.

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1. The Context of Project Management

1.1. What is a Project?

A project is defined by the Project Management Body of Knowledge, or PMBOK as the “temporary endeavor undertaken to create a unique product, service, or result”. In this definition, the idea of “temporary” emerges distinguishing projects from the other activities of an organization, it refers to the well-defined period of time in which a project is framed, it means that a fundamental characteristic of projects is that they have a start date and a delivery date pre-established. It does not necessarily imply that projects are focused on short term targets or to deliver immediate results, in fact many of them last for many years before being completed and their effects may influence future developments for decades. Moreover a project could have impacts different from the economic sphere, having for example social, economic or environmental nature. Consider for example a project for a new bridge, a highway or the building of a new hospital.

The concept of “temporary” can also be extended to the team involved into the project which, in most cases it is created and developed in perspective of the project realization, and will rarely last after the project is delivered or concluded. Usually a project team is formed by experts in different fields, and sometimes coming from different organizations. This can help in collecting the skills and knowledge necessary for that specific project, but also to consider various project aspects, in order to have a broader view on it and lower the risk. When the project is finally delivered, team members are likely to be re-assigned to the unit they came from, or distributed into new teams. (Guida al PMBOK, 2004)

“Uniqueness” is another important point reported in the PMBOK definition, and it refers to the deliverable of the specific project. As a matter of fact the object of a project can be a new product, a service or the setting up of a new function internal to the organization. In any case, every one of these project outputs will be unique, even if some elements or ideas could be shared among them.

Both the concepts of “uniqueness” and “temporary” are accompanied by another project characteristic which is the so called “progressive elaboration”. It refers to

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the fact that projects always have an initial definition of a project area and specifics, but it often happens that these specifics are further developed and improved in their details during the project realization, as the project team develops its knowledge about the product or service they are working on. (Guida al PMBOK, 2004)

1.1.1. Projects and normal operative activities

For the purpose of giving a more complete and precise idea of what is meant when talking about “projects”, it might be useful to make a further distinction between the concept of project and the idea of the “normal” operations taken by an organization. In fact these two frameworks into which one can operate share some characteristics and both refer to a certain amount of work that has to be done to get the expected results, but they are fundamentally diverse in their nature.

In particular Projects and Operative Work share these main points: - They are both executed by people,

- They are subject to planning, monitoring and control

- They have to rely on limited resources (Guida al PMBOK, 2004)

However, as we pointed out before, projects have a temporary nature and unique results, while, when we refer to operative functions, they have the function to support business, with continuative and repetitive outputs. When a project is delivered, it gets terminated together with its framework, while operative functions have always new targets and they keep on working on something else.

The “normal operative activities” reported above, and their capability to deliver results punctually and in an efficient manner are fundamental for the survival of an organization, and they can represent the core business of the firm. At the start of the industrial era, division of labor and efficiency were the main objectives of most industrial organizations, and they have been the trigger for the development of modern industry and mass production. (F. Amatori, A.Colli, 2011) The profit of a company mostly depended on how much it was capable to produce; bigger quantity meant higher profits, and the repetitive operational activities were one of the most important thing. In that time however, the environment in which firms were operating was quite stable with respect to modern international markets.

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Globalization and international competition made the market much more volatile and firms had to differentiate from others in order to survive. Today the market is quite diverse and far more dynamic than ever and organizations recognized the importance of modern project management techniques for the scheduling and control of the project activities.

In fact, in the last years, the application of methods and principles of project management saw an important diffusion, in different industries, all over the world. (Russel D. Archibald, 2004)

As a matter of fact, in the last years there was an increase in the number and size of associations studying the subject. The most important and recognized association, known at a global level is the Project Management Institute, or PMI, with more than 500.000 members in 2017 (in 1990 they were 8.500) (Russel D. Archibald, 2004), distributed in 207 countries. (www.pmi.org)

Edited by the PMI, the Project Management Body of Knowledge, widely known as the PMBOK, is the book in which is collected the set of knowledge and practices used world-wide by professionals involved in Project Management activities. It contains consolidated as well as innovative practices, and it is, therefore, a book in continuous development. Many of the concepts described in this work are also outlined in the PMBOK, as it constitutes the reference point for all those who are dealing with project management.

Up to 2017, more than five million copies of the PMBOK guide were sold at a worldwide level. (www.pmi.org)

Other associations that are worth to be cited are the International Project Management Association (IPMA), which comprehends 28 national associations of project management. The Association for the Advancement of Cost Engineering (AACE) and the Product Development Management Association (PDMA).

As we have seen projects represent a method to organize those activities that are outside the normal firm boundary of actions. (Guida al PMBOK, 2004) They intervene where the so called “organizational routines” that make a company efficient, cannot work. Project management implies the ability to manage also unusual or new situations, trying to obtain the maximum output from the available resources that are put into the project. It is the capability to reach a high level of

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efficiency also in those activities and environments which the organization is not used to deal with.

Sometimes there is confusion and ambiguity in identifying the differences between “projects” and “programs” and these words are often used as synonyms. (Russel D. Archibald, 2004)

There is however, a commonly accepted distinguish between these two entities, and it consists into the identification of programs as a superior entity formed by a group of correlated projects, managed and coordinated with the aim of completing the program to which they belong. (Guida al PMBOK, 2004)

1.1.2. Project Life-Cycle

In order to ensure having a better managerial control on a project, the organization managing it (referred to as the “Performing Organization”), may decide to divide the project into multiple phases which, considered together, will identify the project life-cycle. The project life cycle as a whole defines, then, the phases linking the beginning and the end of a project. (Guida al PMBOK, 2004)

Sometimes the same project life-cycle and the steps it is formed by, can be standardized and applied to many projects while, in other cases, an organization may prefer the project life-cycle to be defined each time by the specific project team assigned to that specific project, especially if projects concern different operative fields. (Guida al PMBOK, 2004)

A typical and very general sequence of the project phases can be the one reported in the figure below:

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Figure 1. Typical phases sequence in a project life-cycle.

Source: Guida al PMBOK, 2004.

There exist no standard list of project phases, as the way in which the various project phases are defined and their number depend on the type of project and on the industry in which it is applied. Moreover, these phases can be further - divided into sub-activities according to the complexity, size or risk level of the project. (Guida al PMBOK, 2004)

Generally speaking, when a project phase is concluded, its deliverable is examined and approved by the project management team of the performing organization, and then the next phase can start. Sometimes, in order to shorten delivery time, the approving body may decide to give authorization to start the next phase even if the precedent one has not been concluded yet. A typical situation could be the building of infrastructures even if a complete plan of the house has not been designed yet. It is the case when the so called “Fast Tracking” method is applied, when there is an overlapping among some project phases. (Guida al PMBOK, 2004)

Activities overlapping, or “Fast Tracking”, during project realization is a phenomena that is sometimes applied in a systematic manner, especially when we refer to the software development industry, where the usual rigid stream of activities is substituted by an iterative life cycle, in which more project phases are developed together. It is the so called “agile” technique, on which we will return in chapter 3.

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1.1.3. The Three Main Variables of a Project

The three main variables that are present in any project, and that constitute the parameters on which a project will be evaluated are the following:

- Performance - Time

- Cost

Performance, or quality management of a project, refers to all the actions taken by the “performing organization”, in order to make the output of the project in line with the objectives that were initially defined. Moreover, the project has to implement the quality policies of the organization, ensuring that standards are applied to the products and processes, still in a continual improvement process perspective. (Guida al PMBOK, 2004)

Time management is the set of activities and actions taken by project management in order to ensure that the project will be delivered within the pre-established terms. The PMBOK guide identifies the following six processes related to project time management:

- Definition of activities - Sequencing of activities - Estimating resources

- Estimating activities duration - Developing project schedule - Controlling the project schedule

These are usually applied in the sequence outlined above in order to be effective, but in some cases they can overlap or be interchanged depending on the type of project we are taking into consideration.

Budgeting is a central activity in every project management process, as planning always incurs cost and does not immediately generate revenue.

As we saw before, some projects last for years before being completed, and their outputs have reflections in many different fields. It is often the case that returns on that particular investment will come only in future years, while costs have to be sustained immediately, during the project development, or even before starting it.

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Cost estimation, cost allocation and cost control are the three main phases that represent the processes involved in any project budgeting. These three activities are necessary in order for the project to be completed accordingly to the pre-established budget. (Guida al PMBOK, 2004)

Budgeting activity is not just the process used to monitor and cut down costs. In fact in a broader view, cost control should take into consideration also the influence that a decision on costs may have on other project areas. It is the case of a new product development, where the resources dedicated to that particular research are often related to the quality of the final output, namely, the product quality and durability. Project deliverables are sometimes subject to a proper “life cycle costing”, which takes into consideration the entire life cycle of the output, considering also the future costs that will, for example, be necessary to manage and maintain the product in the future periods after it is delivered. (www.project-management-knowledge.com)

Now that we have described projects, and the characteristics distinguishing them from the “operative activities” of an organization, it is easier for us to understand what we refer to when talking about “projects” and in what context they are present. However, having something in mind does not imply the ability to represent it effectively to others. As scientific theories have to be demonstrated, also projects have to be described to other people in order to have their approval, to have collaboration in executing the scheduled activities and to monitor the work in progress.

The delineation of a definitive way to represent projects has been a long time process. The models and techniques used in order to represent and manage projects were time by time developed and improved as the complexity of projects changed through history. In the following paragraphs the most widely known models and techniques, still in use today, to represent and manage projects, are described.

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1.2. Representing Projects

Already at the end of the nineteenth century, the basis for “scientific management” were established when Frederick W. Taylor introduced the concepts of control of direct labor costs and direct labor standards. (F. Amatori, A.Colli, 2011) These concepts were mainly applied to repetitive operations in factories, with a high volume production of standardized products. (Robert W. Miller, 1963)

The composition of standard cost on industrial products, together with the concepts of “direct costs”, “semi-direct costs” and “fixed costs”, effectively supported the activity of cost control system up until the early 1950, giving the possibility to the majority of large American businesses to develop sales forecasts and break-even analysis. (Robert W. Miller, 1963)

In this period these instruments were gradually improved and applied to many different industries, representing the best way to interpret and manage large volume standardized productions.

However, in the 1950s, taking advantage from the opportunities coming from the technologies of the second Industrial Revolution, many of the world’s most industrialized countries experienced an increase in the number of innovation processes, and Research & Development (R&D) activities grew in size and importance. (F. Amatori, A.Colli, 2011) Organizations dealing with these innovative programs realized that standard costs used up to that moment and the related cost control approaches could not be applied anymore to such type of activities, and a new method to schedule and control these processes had to be found. (Robert W. Miller, 1963)

1.2.1. Gantt Charts and the Harmonogram

The first scheduling system method was devised by the Polish engineer Karol Adamiecki (1866 – 1933) who, in the mid-‘1890s invented the so called “Harmonogram”. (Marsh, E. R. 1976)

The Harmonogram consists of a billboard with a set of detachable paper strips, each one corresponding to one single activity. Every strip can be switched or removed independently thanks to the clamps put at each end of the strip. On each strip a

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linear time-line is drawn. Strips can thus be shifted with little effort to best represent the succession and flow of activities.

Figure 2. The Harmonogram.

Source: Marsh, E. R., 1976.

This system, developed by Adamiecki, is considered as one of the first examples of activities scheduling representation in project management.

One of the most known management control instruments, still in use today, is the scheduling system method introduced by Henry L. Gantt around 1910. About 15 years after Adamiecki, Henry Gantt, further developed the Harmonogram, and gave birth to the bar-plot model that would become widely known and popular in western countries with the name “Gantt Chart”, from the name of its inventor.

Henry Gantt, American engineer and Project Management consultant, developed this approach while working for the Army Bureau of Ordnance during the World War I. In that context, he realized the importance of a graphical representation for the control and monitoring of the munitions supplying. (Robert W. Miller, 1963) In a typical Gantt Chart, individual orders (or activities) are listed and described on the left-hand side of the chart, while the periods of time scheduled for the accomplishing of each activity are plotted horizontally, with reference to the calendar scale put in the upper part of the chart. (Marsh, E. R., 1976)

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Figure 3. Example of a Gantt Chart.

Source: Marsh, E. R., 1976.

With this technique it is easier to understand when activities are scheduled to occur in a unique time-line. Moreover the individuation of conflicts or overlapping among activities becomes intuitive. Gantt Charts were first used on large construction projects, such as the interstate highway network, which started in 1956 and the Hoover Dam, which started in 1931. (Cermak, T. et Al. 2011)

Today the Gantt Chart is most commonly used for the tracking of project schedules, and thanks to computers and project management software it is possible to use Gantt Chart to represent very large projects, made up of thousands of activities and sub-activities. Furthermore, in the horizontal bars can be also described the activity durations and characteristics, as well as the existing dependencies among each activity.

1.2.2. Project Networks and the Critical Path Method

During and after the Second World War, the issue of improving scheduling techniques for the management of complex projects was given higher and higher attention by large organizations, especially in the United States.

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Cost reduction was the main driver of this research, which involved both private and public organizations. (Robert W. Miller, 1963)

“Research and development has always existed in an advancing technological society, but it was during the years of conflict that initiation of such broad, large-scale research projects as the Manhattan project, dealing with complex and often relatively new concepts and ideas, began to reach fruition” (Desmond L. Cook, 1966)

Looking for an easier and more effective way to manage project scheduling, Morgan R. Walker and James E. Kelly, who were working for the Engineering Services Division of Du Pont, and Remington Rand, respectively, came up in 1957 with the first arrow diagram used to represent projects. Arrow Diagram Method (ADM) is a representative method still in use today to describe the interrelationships among the various tasks and jobs necessary for a project, as it is very intuitive and fast to make up.

Here below is reported simple example of an Arrow Diagram used to represent the logics behind a project network.

Figure 4. An example of an Arrow Diagram Method.

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The dashed lines in figure 4 represent the so called “dummies”, which are elements used just to give the right interpretation of the order in which activities have to be carried out. It is, thus, a way to give a visual representation of the so called “dependencies” that, together with activities and events, are composing the diagram. They are thus virtual activities that do not imply a real work execution, and have duration equal to “0”. In this case, the start of scheduled activity “F” not only has to wait for the completing of activity “H”, but it also depends on the execution of activities ”A” and “K”. (Guida al PMBOK, 2004)

As we have seen, in order to better analyze and interpret the complexities of a project, it is fundamental to represent it clearly and into a simple and comprehensive way.

It is important, thus, to have a clear understanding of the three main elements that put together constitute a project network diagram:

Activities

It is about those actions or tasks composing the framework of processes implied into a project realization. Each activity is associated to a more or less specified amount of time needed to perform it. Taken together they constitute the essence of a project and estimating their duration allows to have an idea of the entire project duration. They are usually identified into the diagram by segments, linking network nodes (events) each other.

Events

They indicate the start or the end of one or of a set of activities, they are usually represented in the diagram by a circle or another geometrical figure. Events identify the initial (start) or the final (end) point of an activity. They are the nodes keeping activities linked each other. From each of them one or more activities can diffuse or gather.

Dependencies

They are the logical constraints between arrows (activities) and circles (events). They can be intended as the “directions” in which segments are put, giving an intuitive idea of the type of relationship existing among the various activities. In

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fact dependencies could imply that an activity has to be necessarily completed before the working team is authorized to start the following one. The constraint can be a “bureaucratic” one, as in case of the need of an expressed authorization or, in other cases it can be a physical one.

Consider, for example, the process of building a new house, where the completion of the foundations (activity “A”) has necessarily to be done before the construction of the perimeter walls of the building (activity “B”). In the example, activity “A” is called a “predecessor” activity that logically comes before a “dependent” activity in a schedule. Activity “B” is to be considered a “successor” activity that logically comes after another activity in the schedule.

Sometimes, instead, activities and tasks have to start or to be completed at the same time. A list of the possible relationships existing among activities can be the following:

- Finish-to-start (FS): when a successor activity cannot start until the previous activity has finished.

- Finish-to-finish (FF): the successor activity cannot finish until the previous activity has finished.

- Start-to-start (SS): the successor activity cannot start until a previous activity has started.

- Start-to-finish (SF): the successor activity cannot finish until the previous activity has started.

The ability to represent projects through arrow diagrams, as well as the logical interrelationships existing among the various activities, represented the first step towards the development of the Critical Path Method.

The Critical Path Method, or CPM is a project scheduling technique used to analyze and represent the tasks involved in completing a given project.

The basic work on CPM was done in 1957 by Morgan R. Walker and James E. Kelly, while trying to improve scheduling techniques used for industrial projects. In that moment, they were concerned with the building of a pilot model plant and the shutdown of a plant for overhaul and maintenance. (Robert W. Miller, 1963) Starting from the development of the Arrow Diagram Method, and inspired by the

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work that had been done at Du Pont during the Manhattan Project they tried to develop algorithms to speed up the scheduling of the projects in which they were involved, ending up with the method of the Critical Path.

The Critical Path Method is an instrument that can be used to reduce the total amount of time needed to deliver a project and it is used to better represent and interpret the relationships among project activities. Differently from the Program Evaluation and Review Technique, or PERT Analysis, on which we will focus later, this method can be said to be more “activity oriented” than “event oriented”. (Russel D. Archibald, 2004) In this perspective the CPM is focused more on the time needed to perform a certain activity rather than on the events linking activities to each other, leading to the determination of the Critical Path, by linking the initial (start date) to the final point (end date) of a project network.

As a matter of fact, the Critical Path Method consists into the identification of the Critical Activities, which are represented by the set of activities dependent among them and that cannot be delayed. Identification of these Critical Activities is fundamental in order to individuate what are those tasks that cannot be performed independently from other tasks and the periods in which those activities have to be performed. Delay in one of these “Critical Activities” could generate a bigger delay in the entire process.

In fact there exist various paths that can be chosen to be followed through-out a project network. Taking into consideration dependencies among activities, Critical Path represents the longest way and also the least tolerant of slippages, being the only one that really looks for time optimization and lags elimination.

In order to perform a Critical Path Analysis it is necessary, first, to establish an expected duration for each activity. Here below is reported an example, using fictitious data, of the steps that have to be followed while performing the CPM analysis:

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Example of Activities:

Then the network structure can be designed as follows:

Each activity is here represented by a rectangular shape, where the activity duration “3” is put under the activity “A”, and at the extremes of each shape are put the following indications:

The first step is to calculate for each activity the Earliest Start Time and the Earliest Finish Time, going in a forward pass from left to right:

- Earliest Start Time (EST): it is the earliest time in which the activity can start - Earliest Finish Time (EFT): it is the earliest time in which the activity can be

concluded according to its expected duration. It is the sum of the EST and the Estimated Duration.

Then, going backward in the process from right to left, the following values are further calculated:

- Latest Finish Time (LFT): it is the Latest time in which the activity can be concluded, according to the Latest Start Time (LST) of the successor activity.

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- Latest Start Time (LST): it is the Latest time in which the activity can start, according to its expected duration. It is equal to the difference between the LFT and the activity duration.

The float “f “of an activity is the difference between the Earliest Start Time and the Latest Start time, and the critical activities are those having float f =0. In our example the floats for each activity are the following:

A:0; B:0; C:0; D:8; E:0; F:0; G:0.

Therefore the Critical Path is formed by the activities highlighted in red: A, B, C, E, F, G.

The non-critical activity “D” is an activity that can be delayed by at most 8 weeks, which corresponds to the so called “Free Float” period.

The Total Float “T” of the process defines the overall flexibility of the project scheduling, and it can be positive, negative or equal to zero. The Critical Paths are those paths into the network, caracterized by a Total float: T ≤ 0.

The CPM method allows to put together activities in the right succession creating a complete and intuitive view of the entire process. Moreover, from an accurately designed CPM we can have an idea of the final duration of the complete process, summing up the activities in the Critical Path (in the example outlined above the total duration of the project is equal to 32 weeks).

This last point, however, is true only if we have reliable duration estimates for the activities involved into the process, or better, if the activities have a duration that is certain. As CPM relies on only one point estimate, taking into consideration one single value as estimate, this method is more reliable when there are standards or prior history on which we can base our estimates. (Robert W. Miller, 1963)

It is the case, for example, when the project involves well known activities for which we are quite sure about the effort they require and consequently, their

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duration. Moreover, there are some activities for which there exist technical limit for which they cannot be performed faster. In order to make an example, we can consider a bottling company, which uses only one machine that, at its full-speed can bottle no more than 100 bottles in one minute. Of course, if the activity concerns the bottling of 10000 items, this activity cannot take less than 100 minutes. Again, if a printer takes one minute to print 80 pages, we are quite sure that to print a book of 400 pages it will take 5 minutes. In a process that concerns a series of this kind of executive activities, CPM can be the proper way to represent it, organize the various steps and obtain time optimization.

However, in uncertainty circumstances, when we face a new situation or when there are many variables influencing activity duration, there is not a single value that can be taken as duration for that task, or better, the value that is indicated into the project network has to be considered as an estimate deriving from a mix of quantitative and qualitative considerations, and there will not be guarantee about the actual duration of that specific activity. It can be the case when we do not have previous experience in performing that specific task and, consequently, we do not have past data on to which we can base our estimate.

For example if a project concerns the ideation and development of a new product, indeed, we cannot rely on previous experiences concerning the duration of R&D activities such as brainstorming, ideation, prototyping, etc.

1.2.3. Program Evaluation and Review Technique

As we have seen before, the numerous systems and techniques for project management that were developed after the Second World War had been successful when applied to relatively small-scale projects, often involving standardized and quite repetitive processes. However, when facing the new large-scale and complex projects in the field of research and automation, they revealed to be of limited usefulness. (Desmond L. Cook, 1966)

PERT was initially developed in the US Navy. A research team was established in 1958 in order to work on a US Navy program called PERT (Program Evaluation Research Task) which aim was to create an integrated planning and control system

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for FBM (Fleet ballistic missile) program, better known as the Polaris Weapons System. It was only later that the acronym PERT became “Program Evaluation and Review Technique” and came to us with this meaning.

While in CPM only a single point estimate is used, in PERT Analysis there is a three-point estimate. This method allows to have an idea of activities duration or cost when there are no standards or prior cases on which we can base on.

It is important, thus, to define these three-point estimates and how to deal with them once they have been assessed. Here below is reported a brief description for each estimate:

- Optimistic: An estimate of the minimum time or cost (a) an activity will take, it refers to the case in which everything “goes right the first time”

- Most likely: An estimate of the most frequent result, occurring if the activity could be repeated independently n. times. It can be intended as the most probable time or cost (m) value of an activity

- Pessimistic: An estimate of the maximum time or cost (b) an activity can take; it is a value occurring for example in case of initial failure. It does not take into consideration, however, factors representing “catastrophic events, such as fires, power failures, floods, strikes and so on.

When the most likely, optimistic and pessimistic values are obtained for each activity, they are to be intended as a probabilistic distribution, with the most likely value m being the most frequent value.

At this point the project manager can calculate the average value M for each activity “α” by using the following formula:

Mα = (a+4m+b)/6

Moreover the Error SD (Standard Deviation) and the Variance “Var” can be obtained for each activity:

SDα = (b-a)/6

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If we can consider the PERT analysis as in order to obtain the probabilistic distribution of the entire process duration or cost, we have to involve in this calculation only the critical activities belonging to the critical path

Once we have summed together the average values of each critical activity, obtaining the total average value of the critical path (Tcrit(mα)), we can calculate

the total Error (Tcrit(SDα)) which is given by the square root of the summation of all the variances of all the activities on the critical path.

Tcrit(mα) = ∑ 𝑚𝑛 α α Tcrit(SDα) = √∑ Var𝑛 α 2 α

The two values obtained above are the basis on which to build the probabilistic distribution of the entire process in analysis, with which the project manager can compute the probability of the project to be delivered in the established period of time respecting the deadlines.

When the PERT Analysis was developed, the complexity and size of the military program in which it had to be applied, lead the research team to initially focus PERT system only on the time scheduling area (PERT/TIME), leaving apart costs. It was only in 1962, after many replications of this technique, under different names, that the USA Federal Government established a uniform guide on PERT/COST Analysis. (Robert W. Miller, 1963)

In fact, PERT Analysis can be used for the estimate of the project activities duration as well as for the costs that will have to be sustained for those activities. In PERT/COST Analysis all of the activities are considered, and not only those on the Critical Path.

However, in most cases the cost of an activity depends also on the duration of the activity itself and resources will be scheduled to each activity once a network of activities is created. It is for this reason that, before doing a PERT/COST Analysis,

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an accurate PERT/TIME Analysis has to be completed, with its detailed networks. (Robert W. Miller, 1963)

The basic objectives of a PERT/COST Analysis are to obtain a more reliable program cost estimate and then, to have an improved control over the actual costs with reference to the original estimate.

The most important thing to be done in order to conduct a PERT/COST Analysis is to develop the so called “Work Breakdown Structure” or WBS, which consists into dividing the single activities in smaller tasks to the lowest level needed.

By this method, a more accurate estimate of costs is possible, but it is not necessarily true that a deeper decomposition of activities is better than a more superficial one. As a matter of fact, while a detailed WBS can facilitate the control and monitoring of activities, thanks to the precision of the data available, an excessive partition of activities could, in some cases, result in a less efficient management of these activities, because of the more complex and time-consuming interpretation of the WBS. The best level of detail to which a WBS should be conducted depends, thus, on the type of project that is being analyzed, and it usually corresponds to an equilibrium point between the highest and lowest level of detail. (Guida al PMBOK, 2004).

Of course the WBS have to be consistent with the PERT/TIME network structure and, to ensure the controlling feature of PERT/COST Analysis, WBS have to be consistent with the estimated costs reported at the beginning of the project.

The lowest level of the WBS is represented by the so called “Cost Work Package”, which corresponds to the level allowing the most reliable estimate on costs and activities duration, facilitating the overall project control. (Guida al PMBOK, 2004) Duration and value of Work Packages mainly depend on the industry involved, the stage and size of program and more in general, on the depth to which the WBS was conducted. Work Packages can be established to have a duration of one or more months, or also not to exceed a pre-established financial value which could be 10.000 as well as 80.000 USD according to the type of project and to the depth to which the WBS has to be conducted. One important point is that every activity composing the network have to be contained into a Cost Work Package, which means that summing up all of the Work Packages we will obtain the total cost of the project. (Robert W. Miller, 1963)

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Figure 5. Diagram of a Work Breakdown Structure.

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2. Presales Projects and Delivery Projects

2.1. Uncertainty management

When we think about Project Management we usually recall great infrastructures, such as road construction, restoring of some building, a new city stadium or the opening of the next shopping center. They are all typical examples regarding large and complex projects, which we all agree, need a careful planning activities before their start. How many times, unfortunately, we see some buildings in construction, that after years of effort are abandoned because of lack of funds, or because the forecasts about demand were too optimistic?

“Severe overruns in time or costs often hit large projects, programs or joint– ventures, both in public and private sectors“. (http://www.lichtenberg.org)

This mainly happens because of a lack of information and documentation in the budget phase and, in the case of tender procedures, it often happens that the offer and the relative forecasted price, is given with a built-in “optimistic bias”, resulting from the competitive situation in which these programs are sold. (Robert W. Miller, 1963)

Scientific Management and Project Management discipline in particular have today developed reliable and effective tools to plan and manage the budgeting, execution and monitoring of complex programs, which can imply many variables and large numbers. This mainly regards the automated computational tools and program software that are now something that was impossible to imagine some years ago. However, the results of these automated calculations and, consequently, the reliability of these instruments, mainly depends on to the amount and the precision of the data that are used as input. These inputs can refer to an objective value, which can be measured and easily standardized, but in many other cases the data that has to be used is necessarily based on some estimates.

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2.2. Estimates and Presales Projects

An estimate can be defined as a numerical evaluation of a possible quantity or result. It gives a value that should represent a possible outcome of an event, or the possible duration or cost of an activity. (Guida al PMBOK, 2004)

In order for an estimate to be reliable, and to understand its weight, it is important to know how it was elaborated and where does it come from.

In particular, the PMBOK guide recognizes for cost estimates the following instruments and techniques:

Analogical Estimate

Analogical Estimate uses as a basis the effective cost of previous similar projects that have already been carried-out in the past, in order to obtain estimates for the present project. This technique is mostly used when there is lack of detailed information on the project, for example on the initial steps of the process. It is not an expensive method, but it is also less accurate than other techniques, and it works well only when the previous project, taken as a basis, is really similar to the present one, also in its contents. Moreover, personnel making this sort of estimates has to be well experienced and sufficiently skilled.

Resource cost determination

In order to be able to estimate costs of scheduled activities, personnel has to know the unit costs of each resource that will be used in that particular activity. This can be represented for example by the cost per hour of personnel, or the cost per kilogram of that particular construction material. Among the various ways of obtaining these values, there’s the possibility to ask suppliers for some offers, or also to watch into databases and published standard lists.

Bottom-Up Estimate

It consists in breaking down the activity into as much levels as possible, then starting the estimate from the lowest level upward. The estimated costs of the single details are then aggregated to the superior level.

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Parametric estimates:

It refers to a technique that puts statistically together historical datasets and the variables related to that particular project, in order to obtain an estimate of the costs of the scheduled activity. Of course its reliability and power is tightly related to the amount and quality of the data contained into the model.

At this point a distinction can be made between the application of project management techniques on projects that are already in progress, to which we will refer to as “delivery projects”, and when dealing with projects that have not been approved yet, also called “presales projects”.

In the first case, when “delivery projects” are considered, an estimated delivery time and a forecasted cost have already been established, and the issue here is with being able to respect these pre-established targets.

The concept of “presales” project refers to the threshold of time going from the request for quotation (RFQ) asked by the client to the final proposal. In this situation and particularly in the case of tender procedures it often happens that a project is discarded because it does not meet the requirements of the client or just because another competitor organization is engaged.

This can be usual business for organizations working by contract, but it can be a common situation also for some internal functions of any firm such as Research and Development (R&D), where uncertainty is always present and there’s often scarcity of financial resources and qualified personnel.

During the phases of proposal and ideation of a project, planning activity usually has a lower level of sophistication, and it is given lesser attention than during the implementation process. This lack of attention during the preliminary activities of a project can influence negatively the course of actions, and lead to difficulties in financing and scheduling. Sometimes, inadequate planning can also cause the project failure during its implementation.

Of course the effort put into these initial steps of a project will always be lower than the commitment needed for the implementation phase. This simply because during proposal and ideation, there’s always the risk for the idea to be discarded. (Russel D. Archibald, 2004)

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That’s the reason why suppliers always tend to create multiple offers for many different clients, often going over their real production capacities. Any supplier is well aware that not all of the proposals will be accepted by the client, and in case of tender procedures, this issue becomes even more important. (Russel D. Archibald, 2004)

On the opposite side, if the supplier is assigned more projects than expected, he will risk to be not able to carry-out all of them, or delay some in favor of others. Again, it is a matter of estimate, and the better the estimate is made, the better is the optimization of the Project Management Office activity.

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3. Project Management and Project Portfolio Management in

Qintesi

3.1. Company Profile

Qintesi is an Italian consulting company which delivers services of system integration and management consulting. In particular it focuses on Information Technology (IT) support and Enterprise Resource Planning (ERP) management services. Its head office and administrative structures are based in Bergamo, while its operative offices are based in Milan City Centre and Marcon, which is a town near Venice. These two operative centers are strategically based in the geographical areas where operate the main clients to which Qintesi offers its services. As a consulting company, Qintesi offers its skills and capabilities to firms operating in many different fields, from Insurance companies to constructions, and from manufacturing to retail.

Thanks to its expertise in ERP management and its continuous effort in keeping updated its resources, with a business of about 17.500.000 € in 2018, and more than 60 clients, Qintesi is today recognized as one of the best companies of software and IT services in Italy.

Moreover, Qintesi is recognized as Service Partner SAP, and it is qualified as SAP Gold Partner and Build Partner.

As a matter of fact, Qintesi is included in the SAP Partner Edge Program, which is a process managed by SAP company for the assessment and recognition of the companies having the highest technical and functional experience in some specific industries or SAP solutions.

In particular this consulting company was awarded SAP REX in Insurance and Engineering, Construction & Operations industries. Its expertise was recognized in various SAP solutions such as SAP S/4HANA and SAP HANA, Financial Management and Enterprise Performance Management, Data Warehousing and Governance, Risk and Compliance.

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Thanks to a relationship with the ERP producer that was consolidated in the years. Qintesi is now able to offer top quality services and products, working with SAP to implement innovation processes in the client companies.

Qintesi Group is composed by the following entities:

Qintesi S.p.A.

As described above, it is the parent company, offering System Integration and Management Consulting services to its clients, in the fields of financial services, manufacturing, engineering & construction, services, energy and resources, retail and fashion. It is considered as an important Italian consulting company, and it is recognized as Gold Partner for what concerns management of the ERP software SAP.

Qintesi Technology & Services

It is a subsidiary of Qintesi S.p.A., and it is concerned with technology infrastructures and maintenance services. It offers services of process outsourcing for IT maintenance, administration, purchasing and Human Resources. It is based in Milan and Bergamo.

BF Partners

It is an associated company of Qintesi S.p.A., and its headquarter is based in Genova. Its activities are focused on distribution and retail, being able to offer support for software implementation and integration of SAP ERP with other platforms, in particular in the fields of Facility Management.

IT-LINK

It is a new associated company of Qintesi S.p.A., and it is specialized in the development of IT projects and services based on SAP solutions. It has expertise in manufacturing sector with particular reference to applications for Industry 4.0 and IoT (Internet of Things). It is based in Mantova and Brescia.

Thanks to its partnerships, Qintesi Group is able to offer a complete portfolio of technological services and integrated solutions in many industries, together with its services of Administrative Consultancy.

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The company Mission is to give a contribution in the value growth and to improve client competitiveness. Always making reference to the best practices in industry, Qintesi’s main business is to offer clients the last updated services, the most suitable SAP solutions and effective operative instruments, by supporting them in the digitalization and innovation processes.

Made up by about 200 collaborators, and with the average age of 34 year-old employees, the company’s motto is “People shaping solutions”. It refers to the strong attention given by the firm to the people that are behind a process. In fact Qintesi refers to itself as a “People company” underlining the importance it gives to its consultants and collaborators, and the fact that everybody into the organization can bring and share his/her ideas in order to improve and grow together. As a service and consulting company, it recognizes that its richness is also made by physical resources but it is mostly constituted by intangible assets, namely the skills, capabilities and knowledge of the people working for the organization. As a matter of fact, in knowledge and process-based organizations, staffing costs remain one of the largest spending areas. (Harvey A. Levine, 2005)

In addition to corporate services, Qintesi organizational chart is characterized by the subdivision into nine Organizational Units, where each one includes the competences and capabilities needed to operate in that particular area. Here below is reported the list of the Organizational Units of Qintesi S.p.A.:

- Risk & Compliance

(Financial Reporting Risk Management, Governance Risk & Compliance, Data Protection & Cyber Security, Data Quality)

- Finance

(Finance, Controlling, Fast Closing and Disclosure, Treasury) - Operations

(Procurement, Plant Maintenance, Warehouse Management, Real Estate Management)

- Insurance

(Insurance Accounting, Agency Collection, Solvency II, Insurance, Performance Management & Business Intelligence)

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- Analytics and data platform

(Business Intelligence, Data Platform & Predictive Analytics) - Performance Management

(Group Fast Closing, Consolidation, Planning & Performance Management) - Development & User Experience

(User Experience, Digital Transformation, Cloud Platform Applications, Software Development)

- Data Integration & Automation

(Data Integration, Data Governance, Internet of Things, Workflow) - Cloud & Infrastructure

(SAP Landscape Evolution & Optimization, Cloud Transition) Source: www.qintesi.com

Units always communicate and collaborate among them, in order to improve speed of processes and to deliver solutions that are coherent with the other aspects of the project. Collaboration among Units is fundamental to ensure the spreading of knowledge and of organizational culture.

3.2. Agile vs Waterfall methods

When dealing with projects, missing to deliver results on budget or the lack in respecting the project schedule or deadlines can be considered as heavy failures and determinants to consider a project management activity successful or not. Nonetheless, it often happens that projects get over budget or late in schedule, “Severe overruns in cost and time frequently bedevil large programs, projects, strategic ventures etc., both private and public.” And “Several research projects have shown that among large IT projects only a small minority came out on budget, while the average overrun was considerable”. (Molokken-Ostvold, 2004)

Stakeholders are often disappointed when the delivered product does not respect the expected quality or when delays occur, and this can also harm the image and credibility of the firm providing its services or products.

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In order to reduce to the lowest possible level the risk of getting into the unpleasant situations reported above, in the last years the majority of firms dealing with ERP implementation or working in the software development area started to use the so called “agile” approach to manage projects. This approach is more flexible and interactive with respect to the usual “waterfall” processes.

The life-cycle of a classic Waterfall project consists in an initial large and usually time-spending evaluation and analysis, with the definition of technical specifics needed by the client. The results of this in-depth analysis are put into the so called “business blueprint” which is a document used as communication tool in which the project data and objectives are defined. Then comes the actual development of the product and its testing, in order to assess its effectiveness and reliability. As final step of the project lifecycle there is production which, in the case of software, consists in the implementation of the program, or application, into the environment to which it was intended.

When we talk about “agile” approach we refer to a project methodology mainly applied to the information technology industry. It consists into a set of logic behind the project development applied in order to obtain rapid delivery of high-quality projects. This is possible through a continuous contact with the client and a high level of flexibility.

According to Fair, J. (2012), among the techniques used on agile projects there are the following:

- Frequent inspection of the product and adaptation to the changes and input during the project

- Aligning development with customer needs and company goals - Co-location of resources to the same work space

- Self-organization and accountability - Elimination of “waste” and “ceremony” - Empirical demonstration of results - Customer is always present

- Focus on key planning events: product planning, release/feature planning, iteration planning, sprint review, and stand-ups.

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This transition from the predictive “waterfall” to the cutting–edge “agile” methodologies happened mainly among the software development firms because of the intrinsic characteristics of this industry, where there are few standards to estimate a budget, many things have to be customized, and the needs outlined by the client at the project approval often have to be revised and modified many times going on with the project implementation.

When agile methodology is used, the project life-cycle changes towards a more flexible implementation process, where there is still an initial phase in which requirements are defined, together with an evaluation of the customer needs, but the usual formal documents such as the “business blueprint” are not used anymore. In this case, the initial detailed, long-term project plan characterizing waterfall projects is left apart, and multiple deadlines get defined. (Fair, J., 2012) Rather than in a unique final output, the product here is delivered by steps in functional stages and an iterative life cycle is defined. As a matter of fact, in agile projects, changes in deliverables and specifics are expected to arise also during the project implementation itself. (Fair, J., 2012) Every definition or change in the product specifics is followed by an immediate prototyping phase and testing. In this way the client can give its feedback to every single delivered functional stage of the project, and changes or improvements can be easily identified and applied to the specific part of the product.

Qintesi is not an exception among the software organizations, and it implements an “agile” approach in every project it undertakes. This reflects also on the way in which the company is organized. As a matter of fact, this organization can be said to be more flat than hierarchical and, for what concerns Projects, the Project Management Office is less structured than in other companies and large autonomy is given to Project Leaders.

During the implementation of the agile method, the continuous alternation of specifics definition and prototyping and the frequent monitoring of the project may be more stressful for both the delivering firm and the client, but in this way the risk of coming out with an output that does not meet the client requirements is much lowered. The same can be said for what concerns the possibility for projects to go

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over budget or being late in schedule. Furthermore, when using agile methodology, the phenomena of “fast tracking” (already described in the first chapter) is applied systematically to the project life-cycle, by developing together more modules of the project and consequently speeding up the process.

Some key differences between waterfall and agile projects are summarized in the table below:

Table 1. Differences between Waterfall and Agile Methods

Source: Fair, J., 2012.

3.3. Project-Driven and Project-Dependent Organizations

Almost every existing firm has to do with projects, in every industry and every market. There are firms for which projects represent their main business and there exist others in which project management is mainly applied to more or less sporadic, internal re-thinking of processes, or to reach specific targets.

With reference to project management, firms can be distinguished in two main categories: project-driven and project-dependent, according to the relationship they have with projects.

Waterfall Agile Projects

Detailed, long-term project plans with single timeline

Shorter planning based on iterations and multiple deliveries

Definitive and rigid project management and team roles

Flexible, cross-functional team composition

Changes in deliverables are discouraged and costly

Changes in deliverables are expected and less impactful

Fully completed product delivered at the end of the timeline

Product delivered in functional stages

Contract-based approach to scope and requirements

Collaborative and interactive approach to requirements Customer is typically involved only at

the beginning and end of a project

Customer is involved throughout the sprint

Linear-phased approach creates dependencies

Concurrent approach seeks to reduce dependencies

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For project-driven firms, their main business is the realization and delivery of projects itself. These are firms working in industries such as constructions, design, engineering groups etc. Generally speaking, project driven organizations are those working by contract and deliver their products or services following specific instructions that may differ from time to time. Their outputs are customized according to the needs and specifics required by the client. For this type of organizations, their market strategy reflects in the choices they make on the nature of the projects in which they get involved and in which projects they put the major effort, in terms of financial and physical resources. (Russel D. Archibald, 2004) In other words, strategy of these firms can be interpreted by how they manage their project portfolio.

In the second type of firms, namely the project-dependent ones, their main business is not project realization but it is represented by the delivery of products and services to the market. They do not work on single-time products for a specific buyer but they offer a more or less standardized product to the entire market. It is the case of manufacturing companies, communication or transportation firms, banks and other financial institutes. Also this type of firms have, however, to do with projects, but in this case these are intended more as support activities, used to manage and improve their core business. (Russel D. Archibald, 2004)

The consulting company we are taking into consideration in this work, according to its nature, can be said it belongs to the first category of organizations, namely the project-driven ones. As a matter of fact consulting companies work on projects by definition, as they are engaged by their many clients through specific contracts, which can refer to a specific set of activities that have to be carried out. As a matter of fact, at the end of 2018 Qintesi was engaged in about two hundred projects at the same time. That means there is about one project for each person of the company. This confirms what we said before about Qintesi being a project-driven firm, or simply, a “project firm”.

However, it is also true that in the last periods an evolution took place in this organization. Indeed, Qintesi started to be involved into various projects, for different clients, but all having the same problematics in their origin. It is the case of the project regarding accomplishing to the new Italian directive on Electronic

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Invoicing, effective from the 1st_{January 2019, by introducing mandatory electronic} invoicing (e-invoicing) for private businesses. In this particular case Qintesi was able to develop an effective solution that was discovered possible to be applied not just to one specific client, but that could be used as solution for various clients facing that particular situation. In this specific case and in few others, about one or two per year, Qintesi started to offer not just its tailor-made services, but an actual product that can then be customized according to client’s specific needs and characteristics.

Working in the IT and ERP management sector as a services company, in Qintesi the main issue when dealing with the specific project scheduling of activities, is about finding the right skill-mix needed for that particular project, and programming these resources through the project timeline. This complex activity has to be made taking into consideration the interrelationships existing among projects, that most of the time overlap each other and by searching for the necessary skills into a common organizational resources pool made up by nine different units. Therefore, as the single project management mainly consists into the scheduling of resources, for what concerns the largest projects, the instruments used in Qintesi for the scheduling representation are almost always based on Gantt Charts. The example reported below regards the realization and execution phases of a medium size project managed by Qintesi in 2016, with the detailed activities WBS in the left-hand side of the graph, and the scheduled threshold of time of each activity reported horizontally with reference to the timeline put in the upper part of the chart. Of course, the example reported here only regards a part of the process implied into this project. Usually, also the other phases such as hardware and software assessment, the contract acceptance, the project initialization, final preparation and the go-live phases are scheduled in this way. Moreover, we specify the data reported in this example are fictitious and inspired by real data, only intended to represent the general case.

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41 F igure 6. Ga ntt C ha rt f or the e xe cuti on pha se of a proje ct i n Qintesi . S ourc e: Exa mpl e r eporte d with t he a uthoriz ati on of Q int esi S .p.A. The da ta re port ed in t his exa m ple a re fic ti ti ous a nd ins pire d by r ea l da ta , only inten de d to r ep re se nt the ge n er al ca se .

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In fact, the most challenging activity in the project management process of Qintesi does not consist on the management of the single project but in the management of the project portfolio, continuously seeking for an alignment between the professional profiles, skills and competences, offered by the company and what is requested by the market.

As we saw, Qintesi mainly works by contract, and with about 30.000 project days to be scheduled in one year, its resources necessarily have to be distributed among the many different projects it undertakes. As a project-driven organization, the management of the project portfolio covers a fundamental role in the organization and, the ability to be successful in this activity is crucial for the organization success and growth. In this perspective, we will now focus on how Qintesi manages its project portfolio and on what kind of instruments it relies on to deliver its services.

3.4. Project Portfolio Management

A Portfolio can be defined as a set of projects, programs or works grouped together in order to facilitate the management of these activities to achieve the strategical targets of the organization. (Guida al PMBOK, 2004)

The project portfolio of an organization can include other sub-portfolios and a number of programs and, of course, projects.

Figure 7. Example of portfolio structure.